Iran ‘on track to see big investments’

LONDON, July 13, 2015

Iran is on course to change significantly over the next decade, with or without a deal, the country is set to witness its greatest upside via opening up to investment, a report said.

Iran will see the most bullish sentiment will be in the first year, added the research note from Renaissance Capital, a leading emerging and frontier markets investment bank.

Iran is the largest and most important economy in our view that is still closed to institutional investors, with an educated 78 million population to rival the 77 million of Turkey; a $404 billion 2014 GDP that is larger than that of the UAE, Thailand or South Africa; and wages that are competitive with those of Vietnam; plus 9 per cent (157 billion barrels) of the world’s oil reserves, close to Canada’s 10 per cent.

The $95 billion market capitalisation of the stock market is larger than five MSCI emerging markets, and all MSCI frontier markets. With roughly $100 million daily turnover and no Iranian restrictions on foreign involvement, we think portfolio flows could be significant as early as 2016.

“We expect $1 billion of inflows to equities within a year of sanctions ending. Others will buy into companies such as MTN or various Turkish stocks as outlined in this report that have operational exposure within the region,” the Renaissance note said.

“Assuming sanctions are gone in early 2016, we see Iran’s oil exports rising 0.8 million barrels per day,” it added.

The US Secretary of State expects sanctions to be eased within six-to-12 months of a deal. Renaissance believes Iran’s reformers will try to minimise that timeframe, meaning Iran could be open to investors in early 2016.

“We expect investors to explore opportunities ahead of time, find custodians and earmark key stocks to buy – though we doubt this will include many banks,” said the noted.

Iranian oil production will rebound by 750,000 barrels per day (b/d) to 4.4 million b/d in 2016, and together with 19 million barrels of stored oil, this could increase Iran’s 1.6 million b/d of (2014) exports to 2.4 million b/d in 2016, according to the note.

As a result, the EU share of Iran’s exports will from 2 per cent in 2014 to the 17 per cent seen in 2011 (before oil exports were sanctioned). – TradeArabia News Service